Is Your Ego Blocking Your Success?

David Lonsdale built and sold three venture-funded companies before becoming president and co-owner of Allegiance Capital in 2005, which provides M&A financial services to middle market business owners.

It’s easy for an entrepreneur to fall into the trap of basing his or her entire self-worth on his or her company’s performance. After all, running your company determines your schedule, your community, and your daily purpose. This isn’t all bad. In fact, some of it is necessary. To be a successful entrepreneur, you need stubborn tenacity and tunnel vision. You work 70 or 80 hours a week. Your venture is the last thing you think of when you go to sleep and the first thing you think of when you wake up.

But when it’s time to sell, you need to take a different perspective. Otherwise, you’re going to end up yelling at your investment banker the way one of my clients yelled at me:

“You obviously don’t understand your job! There isn’t a thing I don’t know about my company, and I sure as hell know its value! If you can’t get the job done, then it looks like I should have hired a better investment banker!”

My client, Jason, was shouting down the telephone loudly enough that I had to hold the receiver away from my ear. There was a sharp clunk as he slammed the phone and hung up on me.

Jason was the founder and CEO of a successful packaging company that specialized in recyclable containers for shipping organic fruit and fruit juice. With a good product and some clever positioning, he had grown the company to more than 200 employees, making a little over $14 million in profits. Now he was ready to sell.

We ended up with three serious, qualified buyers. The offers clustered together in a tight range of $80 to $85 million. This was a good deal: a multiple of 6 times adjusted EBITDA in an industry where multiples were hovering around 4.5 to 5.

However, as you may have noticed, Jason was furious.

You see, several years earlier, one of Jason’s buddies in the industry had sold his packaging company for $98 million. Jason insisted that his business was “better” than his pal’s, and declared that he wouldn’t take a penny less than $100 million.

Jason didn’t realize it, but his demands had absolutely nothing to do with which company was better or more valuable or more successful. Jason wasn’t trying to prove that his company was more worth more than his competitor’s company - he was trying to prove that he himself was worth more as a person than his competitor was.

Here’s where it can be dangerous to let your company define your entire identity. I’ve seen entrepreneurs who would rather lose their marriage than their business - and, in some cases, they did. I’ve seen CEOs who pride themselves on having a balanced life, not realizing that every activity or hobby (whether golfing, or being president of the PTA, or sitting on the board of the local arts council) is still tied, in some way, to promoting the company’s growth. And I’ve seen plenty of guys like Jason who think they have personally failed if their company doesn’t outshine everyone else’s, no matter how unreasonable the comparison.

Unfortunately, Jason couldn’t get out of his own way. Because he couldn’t detach his ego from his company, he missed out on an excellent transaction-;one that would have been great for the company and great for Jason personally.

When you start to see any criticism of your company as a personal attack on you, there’s a problem. Make decisions based on what’s best for your company, and not what’s best for your ego.